Ethanol and Its Relationship To Gasoline

            One topic that has always interested me is Ethanol. As a bit of disclosure here, when I actively practiced law, I used to represent a major Ethanol manufacturer. I learned quite a bit about the business (and at least my client, contrary to popular sentiment, was actually profitable without government subsidies but they had a proprietary process that did use less energy to make the Ethanol than what was generated). And it is fascinating. I am not going to discuss the merits, or lack thereof, depending on your viewpoint, of Ethanol as a fuel (only tangentially) or on the climate, but rather, focus on Ethanol as a fuel additive.

            In the Oil & Gas Industry, we often think of Ethanol as the unwanted neighbor knocking on our door. And there are many arguments against Ethanol as a fuel – from its effect on world food prices (takes too much sugar and corn), to its harm for the climate via land use.

            But what some do not realize is that ethanol has another use: as a fuel additive in high octane fuels. And perhaps, this is where Ethanol shines. I am taking a lot for this article from Jeremy Martin’s article on this topic because I believe it is a great intellectual exploration of the topic.   If you are interested, I suggest clicking here to read the full article. (http://blog.ucsusa.org/jeremy-martin/the-road-to-high-octane-fuels)

 

What Are High Octane Fuels?

            Currently in the U.S., a car’s octane rating is based on its antiknock index (AKI). Without getting to detailed, the higher the octane rating, the more resistant the fuel is to knocking. According to researchers at MIT, this is an outdated measure of engine performance, designed originally to apply to older carbureted engines rather than modern fuel-injected engines. In effect, if you raise octane levels, car makers can then design engines to meet the new standard. Those engines would have a higher compression ratio, which would make the engine smaller and more efficient.   As we will discuss more below, there is an upper limit to this, but overall, a slight transition in octane levels could result in 3% to 4.5% less gasoline consumption, saving U.S. drivers about $6.4 billion per year by 2040 (again, according to researchers at MIT).

          When gasoline is first distilled from oil, it has an octane number of about 70%. If we did not add something to the gasoline, we would severely limit the performance and efficiency of our fuel. So now, refineries processes and additives are geared to raise that number above 87 for regular, and higher for premium.

 

Enter the Ecstatic Ethanol Producers

            Ethanol producers are excited. Ethanol producers want to deliver fuel economy by providing higher octane gasoline. Which, incidentally, would mean more ethanol in the gasoline blend.

            Automakers are also excited. Higher octane levels allow them to improve power and fuel efficiency. So a change in our current standards for octane levels would allow them to squeeze more power and performance out of existing technology – like turbocharging.

            While there is a complex array of technical and regulatory requirements about what can be blended into gas, today most gasoline sold in the U.S. has about 10% ethanol, but if that were increased to 30% without making other changes, the octane level would increase by about 6 points. And because ethanol is generally less expensive than gasoline, higher ethanol blends could offer lower fuel prices (to an extent, as discussed below).

 

But Too Much Ethanol Is a Bad Thing

          But as we have seen from experience, too much ethanol can be a bad thing. While 10% Ethanol blend (E10) has been successful, the higher concentration E85 (which is actually 51%-85% Ethanol) has not. Part of this was market access – E85 only worked in flex-fuel vehicles, and very few gas stations sold it.

          But ethanol actually also has two roles: one as an additive to increase octane, and one as a source of energy. The problem with E85 vehicles is that ethanol as a power source is less energy dense than gasoline. This means you would have to use more ethanol on an E85 blend to drive the same distance as you can on your current gasoline. That would mean E85 is only economically efficient for the consumer if it can be sold at a lower price (low enough to compensate for the lack of distance) to the consumer.

 

So When Is It Good?

            According to some recent studies, an optimized high compression engine using an ethanol blend of between 20-40% would have an efficiency gain that approximately offsets the lower energy content of the blended fuel. Now this gets confusing because there are multiple metrics that we could measure (and if we were politicians, therefore argue) such as miles per dollar or miles per unit of energy.

            So, for example, according to studies, without engine optimization, going from E10 to E25 would have the same energy efficiency, but miles per gallon would actually fall around 5%. That means a car that goes 300 miles on 10 gallons of E10 (current gasoline mix), would only go 285 miles.

 

The Problems/What Has to Happen

            Obviously, as mentioned casually in the front of the article, Ethanol has its own inherent problems – and may not be as good for the climate or the world population as those advocating its use as a primary fuel contend. However, as an additive, it may be beneficial if standards were changed and if engines were optimized. Whether this is a good or bad thing, I will leave you as the judge – I just want to present the facts.

            But note: if the U.S. were to switch to higher octane fuels, the whole transportation system would have to change. From the automakers, to the refineries, to the gas stations. In my opinion, this would inherently drive up the price of ethanol, making the miles per gallon (and therefore the miles per dollar) benefit harder and harder to obtain. Of course, there are many substances producers can make ethanol from other than just sugar and corn. Right now, those are the primary substances. So should ethanol become more prevalent, even as a fuel additive, the Ethanol Industry will have to change. That is a tall order and unlikely to happen in the next few years.

 

By: Ty Chapman

Five Star Metals, Inc.

Raising the Bar for Customer Service and Quality

Twitter: @FSM_TY

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